Messari Analyst Ryan Watkins counted that the placement of only about 1% of the assets of institutional investors in bitcoin is able to raise its capitalization above $ 1 trillion and the rate is $ 50,000.
Bitcoin Investment by institutional investors
Earlier, billionaire Paul Tudor Jones said that he holds about 2% of his portfolio in bitcoin. This statement has raised expectations among cryptocurrency holders that the words of such a famous figure will serve as an example for his colleagues and will become a factor in the adoption of Bitcoin as an institutional investment asset.
The analyst notes that to date, institutional investors have invested in Bitcoin only a small percentage of their assets due to regulatory uncertainty, the unpreparedness of infrastructure, prejudices in society as well as fears about hacking and fraud.
“Although there is no certainty that an influx of institutional capital is about to happen in recent months the likelihood of this has greatly increased. What happens if institutional investors follow the example of Paul Tudor Jones and place a small percentage of their assets in bitcoin? ” – writes Watkins, adding that he conducted the analysis on the basis of the most accurate of the possible estimates of the value of assets managed by such investors.
Watkins expects that the placement of 1% of the assets of various trust funds, family capital management companies, sovereign wealth funds, pension funds and mutual funds in bitcoin will bring $ 480 billion of new capital to the market. With an increase in percentage, potential inflows can be measured in trillions.
As Watkins notes, the input and output of capital in the market does not have to be reflected in changes in the rate of 1 to 1 and can lead to much larger movements. Thus, the potential joining of institutional investors to the Bitcoin space may lead to a 2–25-fold rise in its exchange rate, he says.
“Depending on the initial assumptions, the combined placement of 1% of institutional assets in bitcoin can easily lead to an increase in its capitalization above $ 1 trillion or more than $ 50,000 per coin,” he writes.
Institutional investors can be categorized depending on how likely they are to invest in bitcoin. Thus, pension funds will take much longer to adapt to a new class of assets than family capital management firms.
The most likely bitcoin investors among institutional investors are hedge funds with relatively flexible capital allocation policies. Worldwide, they manage $ 2.9 trillion of assets, which turns into $ 29 billion with a 1% allocation and a noticeable increase in the rate when using the aforementioned fiat multiplier.
“Bitcoin may not need the institutional to succeed. But the reality is that the success of a means of accumulation is measured by its price. If Bitcoin is to become a globally recognized non-state means of accumulation, it will be necessary to convince institutional investors to transfer their capital to it, ”concludes Watkins.